Archive for July, 2009

The Newest Demotivator

| Peter Klein |

From the brilliant folks at Despair, Inc. (via John  Hagel):

bailouts

28 July 2009 at 9:18 am 1 comment

Patenting Economics (and Other Things)

| Nicolai Foss |

The Google Empire appears to be expanding continually, and it is not easy to keep track of its recent conquests. Actually, I learned only yesterday that Google indexes patents and patent applications from the United States Patent and Trademark Office under www.google.com/patents.

The engine — which comprises 7 million patents — is fun to explore. Surprisingly many patent (applications) relate to economics. Many seem downright cranky, such as the application for a Method for the Determination of Economic Potentials and Temperatures (or perhaps I am just ignorant). Lots of management tools are also patented. For example, here is a patent describing a tool for analyzing “strategic capability networks.”

Ian Stewart claims (here) that two prime numbers have been patented (here is the short one: 7,994,412,097,716,110,548,127,211,733,331,600,522,93757,046,707,3,776, 649,963,673,962,686,200,838,432,950,239,103,981,070,728,369,599,816,314,646, 482,720,706,826,018,360,181,196,843,154,224,748,382,211,019 (now, don’t reproduce this, unless you want to get into trouble ;-)), but I haven’t been able to locate them.

28 July 2009 at 6:27 am 10 comments

Alliances and Internal Capital Markets

| Peter Klein |

An interesting contribution to the literature on internal capital markets from David Robinson, “Strategic Alliances and the Boundaries of the Firm,” appeared recently in the Review of Financial Studies (now the third-ranked journal in finance behind the JF and JFE):

Strategic alliances are long-term contracts between legally distinct organizations that provide for sharing the costs and benefits of a mutually beneficial activity. In this paper, I develop and test a model that helps explain why firms sometimes prefer alliances over internally organized projects. I introduce managerial effort into a model of internal capital markets and show how strategic alliances help overcome incentive problems that arise when headquarters cannot pre-commit to particular capital allocations. The model generates a number of implications, which I test using a large sample of alliance transactions in conjunction with Compustat data.

The model builds on Williamson’s concept of forbearance, the idea that courts will enforce contracts between distinct legal entities but will not intervene in intra-firm disputes. The idea is that moving project with particular characteristics — Robinson calls them “longshots” — from a subunit of a diversified firm to an alliance partner allows the firm’s management to make a credible commitment not to expropriate value from the project manager ex post. Empirical evidence shows that projects with longshot characteristics, measured in various ways using Compustat segment data, are indeed more likely to undertaken by alliance partners. A nice paper with a good mix of theory and evidence.

27 July 2009 at 4:49 pm Leave a comment

Is This In the Training Manual for Academic Deans?

| Peter Klein |

Matilda, mother of King Henry II, advising her son on the business of royal patronage (quoted in Danny Danzinger and John Gillinghman, 1215: The Year of Magna Carta, London, Hodder and Stoughton, 2003, p. 178):

He should keep posts vacant for as long as possible, saving the revenues from them for himself, and keeping aspirants to them hanging on him hope. She supported this advice by an unkind parable: an unruly hawk, if meat is often shown it and then snatched away or hid, will become keener, more attentive, and more obedient.

about-indiana-jones-1Speaking of deans, I happened to catch Indiana Jones and the Kingdom of the Cyrstal Skull the other day. The film, you probably know, takes place in the 1950s and centers on Indy’s confrontation with a group of Soviet treasure-hunters. Early in the film Indy loses his academic post because of suspected Communist sympathies. At the end, after defeating the bad guys (hope that’s not a spoiler), Indy not only gets his job back, but is made Associate Dean. That this is considered a reward shows how little anyone in Hollywood knows about university life!

26 July 2009 at 3:44 pm 2 comments

Thanks to Guest Blogger Benito Arruñada

| Peter Klein |

Thanks to Benito Arruñada for a provocative and insightful series of posts over the last few weeks. We look forward to Benito’s continuing participation in the comment threads here at O&M. You can also follow the action (in English and Spanish) at Benito’s own blog.

Watch for more guest bloggers to be announced soon!

25 July 2009 at 10:44 am Leave a comment

The Zen (or Feng Shui) of Copyright

| Dick Langlois |

Peter blogged some time ago about intellectual property rights in comedy. Turnabout is fair play; and here, in a kind of post-modernist twist, is a comedic take on intellectual property rights — from the Onion.

Intellectual Property Rights as Fleeting as the Scent of Jasmine, Mayfly’s Wing

BEIJING — Settling not on the industrious sons of China, nor on their ware-covered blankets, ownership rights of intellectual property fluttered silently by, unseen, on Monday, as does the gentle mayfly on a warm harvest-time breeze. “Is this a pirated DVD of Transformers 2 dreaming it is an original? Or is it an original Transformers 2 dreaming of an adventurous life as a pirate?” a sidewalk merchant in Tiananmen Square whispered to a moment already gone, as his hands clutched some worldly illusion of the Michael Bay film. “Eight dollars. Plays anywhere in the world.” In their great wisdom, the merchants also carried forth the ancient teachings of Zhuangzi — who spoke of how time is a riddle answered by eternity — to the equally fleeting earthly conceits of trademarked wristwatches, electronics, clothing items, Starbucks, and automobiles.

The piece is part of a new online issue whose conceit is that the Onion has been sold to Chinese interests. It’s quite good — the Onion is at its best when it has an overarching theme, as in the Our Dumb Century book. Of course, one of the multiple layers of meaning in the joke may have to do with the fact that the real magazine actually is apparently up for sale.

24 July 2009 at 1:35 pm 1 comment

More on Wall Street

| Peter Klein |

Further to my recent Wall Street post, see Jeff Tucker’s take, “Capitalism as Drama”:

In the same way that the Godfather movies shaped the culture of organized crime, Wall Street continues to influence the way traders and high-flying capitalists understand themselves.

And it’s no wonder. The impression one is left with is all about the courage, the thrill of the fight, the riskiness of entrepreneurship, that struggle to obtain vast wealth, and the striving for the status of “master of the universe.” It pictures commerce as a gladiator fight, a magnificent and relentless struggle for progress, an epoch and massively important terrain in which the fate of civilization is determined. (more…)

24 July 2009 at 8:53 am Leave a comment

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Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).

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